Singapore's economy is expected to see slower growth in 2023 after its rapid recovery from the pandemic in 2022, with the Ministry of Trade and Industry recently narrowing the GDP growth forecast for the year.1 As industries continue to feel the pinch of high inflation and interest rates, creditors and debtors alike may be considering appropriate solutions for companies which struggle to pay their debts.
Singapore has earned a budding reputation as a hub for debt restructuring and insolvency in Asia, with its transparent legal system and judicial expertise. This growth can also be attributed to enduring efforts to innovate and reform.
To enhance Singapore as a forum of choice in international restructuring and insolvency proceedings, the Rules of Court were amended with effect from 1 October 2022 to allow restructuring and insolvency matters which are international and commercial in nature to now be heard in the Singapore International Commercial Court ("SICC").
After several unsuccessful legislative endeavors in 2000-2001, 2008-2009 and 2014, the Hong Kong government plans to relaunch the much-anticipated Companies (Corporate Rescue) Bill (the “ Bill “) in 2021.
The Privy Council's recent judgment in Weavering[1]upheld the decisions of the Cayman Islands Grand Court and Court of Appeal that payments made to redeemed investors immediately prior to the fund's liquidation were preference payments under section 145(1) of the Companies Law (2018 Revision) (Law), and must be repaid.
RE Z III Trust [2019] JRC 069
The Royal Court of Jersey has determined that the preferred course to follow when winding up an insolvent trust is for the existing trustee to apply a formal winding up procedure under the Court's supervision. Key features of this procedure would be (i) a moratorium on legal claims; (ii) the trustee should advertise for claims on the trust assets; and (iii) the trustee should require creditors to prove their claims before distributing the assets.
The Z Trusts litigation
Frequently a debtor’s assets are sold out of bankruptcy “free and clear” of liens and claims under §363(f). While the Bankruptcy Code imposes limits on this ability to sell assets, it does allow the sale free and clear if “such interest is in bona fide dispute” or if the price is high enough or the holder of the adverse interest “could be compelled ... to accept a money satisfaction of such interest” or if nonbankruptcy law permits such sale free and clear of such interest.
On February 5, 2016 the IRS released Chief Counsel Advice Memorandum Number 201606027 (the IRS Memo) concluding that “bad boy guarantees” may cause nonrecourse financing to become, for tax purposes, the sole recourse debt of the guarantor. This can dramatically affect the tax basis and at-risk investment of the borrowing entity’s partners or members. Non-recourse liability generally increases the tax basis and at-risk investment of all parties but recourse liability increases only that of the guarantor.
A long-honored concept in real property, that of “covenants running with the land,” is finding its way into the bankruptcy courts. If a covenant (a promise) runs with the land then it burdens or benefits particular real property and will be binding on the successor owner; if that covenant does not run with the land then it is personal and binds those who promised but does not impose itself on a successor owner.
We are often asked what to do if you have an operating agreement and your operator or one of the other working interest owners files for bankruptcy. The Bankruptcy Code allows the debtor to assume or reject the JOA (it is usually an executory contract).
On November 13, 2015, the Federal Deposit Insurance Corporation (FDIC) issued Financial Institution Letter 51-2015 (FIL-51-2015), FDIC Seeking Comment on Frequently Asked Questions Regarding Identifying, Accepting and Reporting Brokered Deposits. FIL-51-2015 seeks comments on the proposed updates to the existing FAQ document on brokered deposits, which was initially released in January of 2015 in FIL-2-2015, after additional comments and questions have been received by the FDIC since the initial issuance.